Hurricanes create havoc and large costs, as nobody doubts. Some of those costs are easy to measure: life are lost, property is damaged, insurance companies pay out claims. But there can be a more subtle, long-term cost that goes beyond the physical replacement of destruction. Hurricane Katrina still has a profound impact on New Orleans, four years after landfall and will have for many years to come, as the city is still much less populated than before and its labor market is profoundly changed. Four years is still short, though, to analyze the long term.
Makena Coffman and Ilan Noy study the case of the Hawaiian island of Kauai that was affected by hurricane Iniki in 1992, while neighboring Maui was not. Comparing the two islands, it appears clearly that while externally there are few signs of the hurricane seventeen years ago, Kauai is still suffering, mostly because its labor market still has not recovered, despite massive transfers right after the storm. Population took a permanent hit, at least partly as a consequence of a sudden drop in the housing stock and a spike in unemployment, and never recovered compared to the neighboring island.
New Orleans shows similar signs, if not stronger, given that many are saying this city is poorly located and its partial destruction should be taken as an opportunity to relocate. It appears the same happened on Kauai, although one has to wonder, because the other islands of Hawaii face very similar risks.